Public Debt Management

Public Debt Management

Introduction

Public (Sovereign) debt management is the process of establishing and executing a strategy for managing the government’s debt in order to raise the required amount of funding, achieve its risk and cost objectives and to meet any other sovereign debt management goals the government may have set, such as developing and maintaining an efficient market for government securities.
In a broader macroeconomic context for public policy, governments should seek to ensure that both the level and rate of growth in their public debt is fundamentally sustainable, and can be serviced under a wide range of circumstances while meeting cost and risk objectives. Sovereign debt managers share fiscal and monetary policy advisors concerns that public sector indebtedness remains on a sustainable path and that a credible strategy is in place to reduce excessive levels of debt.
Poorly structured debt in terms of maturity, currency, or interest rate composition and large and unfunded contingent liabilities have been important factors in inducing or propagating economic crises in many countries throughout history. Several debt market crises have highlighted the importance of sound debt management practices and the need for an efficient and sound capital market. Although government debt management policies may not have been the sole or even the main cause of these crises, the maturity structure, and interest rate and currency composition of the government’s debt portfolio, together with substantial obligations in respect of contingent liabilities have often contributed to the severity of the crisis. Even in situations where there are sound macroeconomic policy settings, risky debt management practices increase the vulnerability of the economy to economic and financial shocks.

Objective

The main objective of the study is to understand how public debt management ensures that the governments financing needs and its payment obligations are met at the lowest possible cost over the medium to long run, consistent with a prudent degree of risk. Also what steps a government can take during certain types of economic crisis.

Methodology

The study would be conducted by reading various research papers on the topic and analysing how various governments approach their public debt management.

References

Divestments in public enterprises: The Indian experience
Sankar, T L; Mishra, R K; Mohammed, A Lateef Syed
The International Journal of Public Sector Management, 1994, pg. 69

Risks Associated to Public Governmental Debt and Their Management
Alina Georgiana Holt
Annals of the University of Petroşani, Economics, 9(2), 2009, pg. 13-20

Buybacks of Domestic Debt in Public Debt Management
Silvia Marchesi
The European Journal of Finance, Vol. 12, No. 5, pg. 379–400, July 2006

Debt Management in Brazil: Evaluation of the Real Plan and Challenges Ahead
Afonso S. Bevilaqua and Marcio G.P. Garcia
International Journal of Finance and Economics, pg. 15-35, 2002

A Theory of Public Debt Management with Unobservable Demand
Graziella Bertocchi
The Economic Journal, 103 [July], pg. 960-974

References: The International Journal of Public Sector Management, 1994, pg. 69 Risks Associated to Public Governmental Debt and Their Management Alina Georgiana Holt Annals of the University of Petroşani, Economics, 9(2), 2009, pg